Two-Cent Pennies: a Window on Inflation

Ludwig von Mises Institute ^ | August 21, 2008 | Tyler A. Watts

[djsherin]

Johnny Carson might have quipped about the economy, "Inflation is so bad these days… that pennies are now selling on the street for two cents."

This joke may not be all that funny, even with the great Carnac delivering it, but it does have the underpinnings of good comedy: an absurd story based on a kernel of truth.

Old pennies are routinely traded at premium prices, sometimes twice or more their face value. This is not because they are rare or precious — they were minted by the tens of billions — but simply because they are worth more as metal than as money.

Because of this "bullion premium" on the older pennies, a small cadre of penny hoarders is actively searching through America's stock of pennies to pick out these undervalued coins.

Casual observers are not struck with a deep sense of economic import when they learn about penny hoarding. Neither are most economists. The government dealt with the problem by simply making the coin out of a much cheaper metal: zinc. So what's the big deal?

Well, it turns out that the cheaper metal didn't stay cheap forever, and again it costs the US mint more than a cent to make a penny (and, incidentally, more than 5 cents to make a nickel).

[Dagny&Hank]

You do understand why dimes, quarters and fifty cent pieces were made those sizes?

Yes, they were 1/10th, 1/4 and 1/2 of 0.7234 troy ounces of silver.

What I proposed above has nothing to do with the dime or greater coins. I only propose that the penny and nickel be made smaller than the dime.

[TomasUSMC]

Everytime I go to the bank, I ask for 2 rolls of nickels.

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Damn! lol